200

Factors affecting employer adoption of drug testing in New Zealand

Jarrod M. HaarUniversity of Waikato, Hamilton, New Zealand

Chester S. SpellRutgers University, Camden, New Jersey, USA

This paper explores employer attitudes towards drug testing in New Zealand to establish under what conditions adoption may be encouraged or discouraged. A survey of 162 New Zealand employers found that adoption rates of drug testing policies were low at 6 per cent. Exploring predictors of the likelihood ofdrug testing adoption in the next year found that firms that are more compliant to institutional pressures were more likely to seek adoption, as were firms thatperceived positive benefits from adoption. Further, firms that perceived negativeeffects from drug testing, such as union pressures, were less likely to adopt drugtesting in the future. Additionally, the moderating effects of organisational sizewas explored, and significantly affected likely adoption rates, with larger firmsbeing more influenced by institutional pressures and positive effects. However,there was no significant moderation effect towards negative effects of drug testing,which remained strongly negative irrespective of organisational size.

Keywords: employee drug testing, institutional theory, New Zealand employers, organisational size

Advocates of drug testing policies believe these policies can provide an edge inbusiness in an increasingly competitive business environment. Proponentsargue that a huge proportion of lost productivity can be saved by addressingdrug use in the workplace (Oleson 2004; Lu and Kleiner 2004; Zetlin 1991;Galaif, Newcomb and Carmona 2001). For example, Paronto et al. (2002, 1159)stated ‘drug use on and off the job can have negative effects on performance’,and Frone (1998) found substance abuse linked to workplace injuries.

Correspondence to: Dr Jarrod M. Haar, Department of Strategy and Human ResourceManagement, University of Waikato, Private Bag 3105, Hamilton, New Zealand; fax: +64 7 838 4356; e-mail: haar@waikato.ac.nz

Asia Pacific Journal of Human Resources. Published by SAGE Publications (Los Angeles, London, New Delhi andSingapore; www.sagepublications.com) on behalf of the Australian Human Resources Institute. Copyright © 2007Australian Human Resources Institute. Volume 45(2): 200–217. [1038-4111] DOI: 10.1177/1038411107079116.

Asia Pacific Journal of Human Resources 2007 45(2)

APJHR_45_2_Haar.qxd 29/05/2007 10:25 PM Page 200

Employee drug testing is popular in the United States (US), and has alsobecome established in Australia, with Australia being the first country to trialdrug testing of drivers (Institute of Transportation Engineers 2005). Thus, drugabuse may now be viewed as a greater societal level issue rather than just anemployment issue. While information on New Zealand adoption rates islimited, conditions in New Zealand may encourage its proliferation there.Kelsey (1997) described the reforms that rocked New Zealand from 1984 to thelate 1990s as focusing on New Zealand’s uncompetitive, ‘cost-plus’ economy,which led to a program of regulatory reform with the ‘fundamentals’ of marketliberalisation and free trade, limited government intervention and a deregu-lated labour market. Of particular note is the focus on productivity, which wasportrayed as a major source behind the New Zealand reforms.

Productivity has been a driving force behind drug testing adoption, withclaims that alcohol and drug use in the US workplace is an important issuefacing business and industry (Truxillo, Normandy and Bauer 2001; Harris andHeft 1992). Truxillo et al. (2001, 87–8) stated ‘employee drug use is a seriousorganizational issue that has societal consequences as well. Whether usingdrugs on or off the job, workers can create a significant loss of revenue fortheir companies’. Because of the attention to productivity in New Zealand, itis possible that employee drug testing could be seen as a way of improvingproductivity in an under-performing economy. This paper explores employerattitudes towards drug testing in New Zealand, and investigates institutionalpressures, and the perceived positive and negative benefits associated with drugtesting policies, as predictors of the likelihood of drug testing adoption.Further, the moderating effect of organisational size tests whether larger firmsare more highly influenced by these pressures.

The US leads the world in the adoption of drug testing programs (Oleson2004; Turner 1995). Oleson (2004) reported that the largest US laboratoryconducted over 6 million tests in 2000. It was noted in the 1990s that theadoption rates of drug testing programs in the US have grown markedly(Blum, Fields, Milne, and Spell 1992). Consequently, employees increasinglyface the prospect of drug testing (Hoffman and Larison, 1999; Oleson 2004).Organisational size has been linked to drug testing adoption, with larger firmsmore likely to adopt drug testing programs than smaller companies (Harrisand Heft 1992; Hayghe 1991). Oleson (2004, 71) noted that, with regard to theUS, ‘nationally, the trend has been for larger employers to almost routinelydrug test’. This aspect is supported in Australasia, with large New Zealandfirms adopting drug testing programs, for example, Fletcher ChallengeForestry (The Dominion 1998), Carter Holt Harvey (The Press 1998) and ShellOil (Botting 1998), and large Australian firms, for example BHP-Billiton(BHP-Billiton 2005).

Adoption of drug testing in NZ 201

Drug testing

APJHR_45_2_Haar.qxd 29/05/2007 10:25 PM Page 201

Size is an important factor in the New Zealand context, with its smalloverall population (4 million people in total). Statistics New Zealand (2005)reported that 96 per cent of New Zealand firms had fewer than 20 employees.Consequently, the adoption rates of drug testing in New Zealand would beexpected to be low, and a study by Gilson and Wagar (1996) found only 6 percent of New Zealand firms had an employee drug testing policy. The apparentlimitation of drug testing adoption in smaller countries encourages researchersto explore under what circumstances New Zealand employers would adoptemployee drug testing. Further, studying the drug testing phenomenon inNew Zealand in its infancy may provide a useful benchmark for futureresearchers. This may be particularly important if drug testing adoption ratesdo increase in New Zealand. The next section explores institutional theory tohelp explain under what conditions employers would be more likely to adoptemployee drug testing policies in New Zealand.

Institutional theory implies that many structures, programs and practices inorganisations attain legitimacy through the social construction of reality (Scott1995). Deephouse (1996) noted that institutional theory is useful for examiningthe factors that lead organisations to adopt similar structures, strategies andprocesses (e.g. drug testing policies). Oliver (1991) noted that institutionaltheory focuses specifically on the pressures and constraints of the institutionalenvironment such as government agencies, laws, courts and professions. Theinstitutional context includes influences from state, society and inter-firmrelations (Oliver 1997). According to Gupta, Dirsith and Fogarty (1994), withinstitutional theory, organisations need to demonstrate conformity to institu-tionalised expectations of rational practice, and as such, this behaviour influ-ences their choices of action. For example, a firm wishing to be seen asprogressive and mindful of employee behaviour may adopt drug testingpolicies as a way of demonstrating this.

DiMaggio and Powell (1983) identified three types of institutionalpressure: mimetic, where firms adopt programs in order to un/consciouslymodel themselves after competitors considered as successful or more legiti-mate; normative isomorphism, which stems from the introduction of profes-sionals and professional knowledge in order to establish a cognitive base toensure legitimacy and occupational autonomy; and coercive isomorphism,where adoption results from political pressure (e.g. government regulations).For example, the US Drug-Free Workplace Act (1988) requires an organisationwith federal contracts worth US$25 000 or more to have a written policyregarding drugs in the workplace, to provide a drug-free awareness program,and to take disciplinary action against employees convicted of drug use (Harrisand Heft 1992). Thus, legislative pressure has been a major influence in theadoption of employee drug testing in the US.

202 Asia Pacific Journal of Human Resources 2007 45(2)

Institutional theory and hypotheses

APJHR_45_2_Haar.qxd 29/05/2007 10:25 PM Page 202

An example of a coercive legislative pressure in New Zealand might bethe Health and Safety in Employment Amendment Act 2002. The act notes thatemployees must be protected, and significant hazards minimised, and this Actmay encourage employers to protect employees from co-worker substanceabuse. However, laws similar to the Drug-Free Workplace Act in the US donot appear to be even contemplated in New Zealand or Australia. Kossek,Dass, and DeMarr (1994) asserted that mimetic and normative pressures are amore favourable influence on early adoption, while coercive pressures mayhave an inhibiting influence, because coercive pressures involve sensitivity tonegative or forced pressures, which firms may initially resist. Knudsen, Romanand Johnson (2004) noted that pre-employment drug testing had becomenormative in nature in the US.

Using institutional theory to explore the likelihood of drug testingadoption in New Zealand is appropriate given the productivity focus on NewZealand firms over the past decade. Mimetic pressures might encourage organ-isations to consciously or unconsciously adopt drug testing to model themselvesafter US firms that have enjoyed productivity gains. Further, normativepressures may stem from international-based practice and professionalknowledge brought from the US into New Zealand. Perkin (1996) stated thatof the world’s largest 100 translational corporations, five are based in NewZealand, with similar numbers in Canada and Australia. Their presenceindicates that New Zealand, while globally small, can still be exposed to firmson the world stage, and multinational corporations may seek to implementcommon practices into their New Zealand head offices, such as employee drugtesting. Consequently, we expect New Zealand firms that are compliant to theinstitutional pressures regarding drug testing adoption they face will be morelikely to adopt a drug testing programs.

Hypothesis 1: Firms that are more compliant to institutional pressures toemployee drug testing will be more likely to consider adopting employeedrug testing.

The literature on employee drug testing indicates that institutionalpressures based on potential economic benefits may also drive policy adoption.Rothman (1988) noted that drug testing popularity has intensified with theincrease in substance abuse. Thus, the rapid rise of drug testing programs inthe US has occurred because drug and alcohol abuse is considered one of themost critical problems facing US businesses today (Seijts, Skarlicki, andGilliland 2003; Lu and Kleiner 2004; Rockmore, Zimmerer and Jones 1997;Turner 1995; Zetlin 1991) and firms are under greater pressure from stake-holders to address such issues. Supporters of drug testing programs reportproductivity losses in accidents, lost time, and health care and workers’compensation cost. Productivity losses directly attributed to drug and alcoholabuse in the US has been reported in the billions of US dollars, with Lu and

Adoption of drug testing in NZ 203

APJHR_45_2_Haar.qxd 29/05/2007 10:25 PM Page 203

Kleiner (2004) stating the US Labor Department puts the figure as high asUS$100 billion per year. Eckersley (1995) suggested that while employee drugtesting is not advocated as the solution to all productivity concerns, it hasbecome highly regarded as leading to effective cost savings. For US employers,drug testing is seen as a solution to drug abuse (Lu and Kleiner 2004) and away to improve financial performance (Segal 1991). Given the links betweenproductivity, drug abuse, and drug testing, at least in the US, positive effectssuch as productivity gains should positively influence drug testing adoption byNew Zealand firms.

Hypothesis 2: Firms that perceive greater positive effects from employeedrug testing will be more likely to consider adopting employee drug testing.

Despite the positive aspects, negative aspects of drug testing programshave also been suggested. Segal (1991) noted that union resistance to randomdrug testing is very strong, and Lu and Kleiner (2004, 46) stated that ‘moreand more lawsuits are involved in drug testing issues’. Rockmore, Zimmererand Jones (1997) stated that employees may also develop the perception thatthey are not trusted and that drug testing is an invasion of their privacy.While the majority (92%) of drug testing by US companies is urine sampling(Bahls 1998), the most reliable testing methods can cost US$75 or more perperson (Rockmore, Zimmerer and Jones 1997). Therefore, employer percep-tions of employee and union resistance, privacy concerns and programexpense (e.g. Oleson 2004), may all negatively impact on the New Zealanddrug testing adoption rates. Segal (1991) noted that union pressure in the US has often led to an emphasis on drug testing specifically ‘for cause’,which refers to testing linked to suspicion of drug use, for example after an accident. However, in New Zealand, union density has significantlydecreased over the past decade.

Dannin (1996) noted that New Zealand once had the highest uniondensity in the capitalist world, but after the legislative changes of the 1990s,which led to fluctuating fortunes for New Zealand unions, membership stoodat around 22 per cent in 2003 (Dearnaley 2003a). Despite this reduced power,unions had taken legal proceedings against Air New Zealand, which conductspre-employment testing (Dearnaley 2003b), and has won the right to conductrandom drug testing (Batchelor 2004). Employers may see employee and unionopposition as highly negative and problematic issues influencing programadoption. Therefore, it is hypothesised that under normative isomorphism,professional knowledge of drug testing programs may lead firms to considerboth the potential positive and negative effects of drug testing policies. Ascoercive pressures can inhibit adoption due to sensitivity to negative pressures,such as media attention (Kossek, Dass and DeMarr 1994), it is expected that thedetrimental effects of drug testing (e.g. cost and publicity) will have a negativeinfluence on firm adoption.

204 Asia Pacific Journal of Human Resources 2007 45(2)

APJHR_45_2_Haar.qxd 29/05/2007 10:25 PM Page 204

Hypothesis 3 : Firms that perceive greater negative effects from employeedrug testing will be less likely to consider adopting employee drug testing.

As noted above, researchers have contended that larger sized organisa-tions are more likely to adopt drug testing programs (Oleson 2004). Tepper(1994, 392) stated that ‘most large corporations have implemented drug-testingprograms’ and organisational size has been used in drug testing studies (e.g.Knudsen, Roman and Johnson 2004). Larger size organisations may have thefinancial resources to conduct potentially expensive HR practices like drugtesting. From an institutional theory perspective, larger organisations are morelikely to be influenced by multiple stakeholders, face greater criticism for beingunproductive, and consequently seek out more policies to improve efficiency.Therefore, it is hypothesised that organisational size will influence the abovefactors in determining drug testing program adoption, by enhancing the directrelationships hypothesised above.

Hypothesis 4: Organisational size will strengthen the relationship betweencompliance to institutional pressures to employee drug testing adoption.

Hypothesis 5: Organisational size will strengthen the relationship betweenpositive effects from employee drug testing and employee drug testingadoption.

Hypothesis 6: Organisational size will strengthen the relationship betweennegative effects from employee drug testing and employee drug testingadoption.

Sample and procedures

Data was collected from a mail survey of 997 randomly assigned New Zealandcompanies, drawn from the Kompass New Zealand company list. CEO’s orhuman resource management managers were surveyed regarding organisa-tional characteristics (number of employees, turnover, industry etc.) and abouttheir attitudes towards employee drug testing. In total, 229 responses werereturned, ranging from one employee to 8800 employees, for a response rate of23 per cent. Given the unlikelihood that small firms would be consideringdrug testing adoption, the minimum organisational size was set at 10employees. This removed 67 responses, leaving a sample of 162 respondentswith a minimum of 10 employees, for a response rate of 16.2 per cent. Onaverage, respondents employed 207 people (SD = 781) and had an averageturnover rate of 9.1 per cent.

Adoption of drug testing in NZ 205

Method

APJHR_45_2_Haar.qxd 29/05/2007 10:25 PM Page 205

Measures

A measure for the ‘Likelihood of drug testing adoption’ was determined byusing a 3-item scale developed for this study. Questions followed the stem‘Within the next year, what is the likelihood you will begin drug testing of…’and was asked about pre-employment, for cause, and random testing ofemployees. These have been identified within the literature as being the mostcommon forms of employee drug testing methods (Oleson 2004; Bahls 1998;Harris and Heft, 1992). Responses were coded 1 = none, 5 = very likely, witha higher score indicating a greater likelihood of adopting some form of drug testing. Factor analysis (principal components, varimax rotation)showed the items loaded onto a single factor with an eigenvalues greater than1 (2.4), accounted for 80 per cent of the variance, and had a Cronbach’s alphawas .87.

‘Compliance with institutional pressures’ is a measure for determining anorganisation’s compliance or resistance to institutional factors (e.g. professionalbodies). It was calculated using a 4-item scale developed for this study.Questions followed the stem ‘What best represents your worksite’s responseto pressures from each of the following sources to address employee drug use?’and were asked about four sources: professional or trade organisations, otheremployers in your area, other employers in your industry, and the media.Responses were coded 1 = highly resistant, 5 = highly compliant. A high scoreindicate a greater acceptance to comply with pressures to adopt employee drugtesting. Factor analysis (principal components, varimax rotation) showed theitems loaded onto a single factor with an eigenvalues greater than 1 (2.9),accounted for 73 per cent of the variance, and had an adequate reliability(Cronbach’s alpha = .87).

‘Drug testing positive effects’ and ‘Drug testing negative effects’ weredetermined by using an 8-item scale developed for this study. Questionsfollowed the stem ‘Drug testing’ and were coded 1 = strongly disagree, 5 =strongly agree. Questions used, factor analysis outcomes, and the reliabilitycoefficients are shown in table 1.

The resulting factor analysis resulted in two components with eigenvaluesgreater than 1. The components split into two distinct measures, drug testingpositive effects (eigenvalues = 2.68, accounting for 33.5% of the variance,Cronbach’s alpha of .87) and drug testing negative effects (eigenvalues = 2.56,accounting for 32% of the variance, Cronbach’s alpha of = .78).

‘Organisational size’ was measured by number of employees. While thisvariable had a high level of skewness (8.75), a number of transformations areavailable to deal with such problems (Cohen and Cohen, 1983). Because theorganisational size differed widely across the number of cases, a log-transfor-mation was conducted on organisational size to induce normality (Stone andHollenbeck, 1989). After the log transformation, the skewness was withinnormal boundaries of ±1.0 (0.87).

206 Asia Pacific Journal of Human Resources 2007 45(2)

APJHR_45_2_Haar.qxd 29/05/2007 10:25 PM Page 206

‘Employee turnover rate’ (percentage turnover rate) was controlled forbecause firms experiencing higher turnover may view drug testing as a methodof reducing productivity losses through employee turnover by eliminatingdrug users before they are employed.

A second control variable was ‘Likely drug testing sector’, which relatesto industries more likely to adopt drug testing than not. For example, drugtesting organisations in New Zealand are predominately involved in theprimary sector (e.g. Fletcher Challenge Forestry). In addition, the transporta-tion industry is highly safety conscious internationally, drug testing is legis-lated in this sector in the US, and Air New Zealand conducts pre-employmentdrug testing (Dearnaley 2003b). Consequently, firms within primary and trans-portation sectors were controlled for. Each organisation was asked to identifyits primary business industry as per SIC codes. This variable was then deter-mined by recoding responses to 1 = agriculture, mining and construction, andtransportation, 0 = manufacturing, trade, finance, real estate, insurance,services, and public administration.

Analysis

To examine the direct effects of compliance with institutional pressures, drugtesting positive effects, and drug testing negative effects towards likelihood ofdrug testing adoption (hypotheses 1 to 3), and the potential moderating effectsof organisational size (hypotheses 4 to 6), separate hierarchical regressionanalyses were conducted. Control variables (employee turnover rate and likelydrug testing sector) were entered in step 1. Predictor variables were addedseparately in step 2. The potential moderator (organisational size) was entered

Adoption of drug testing in NZ 207

Table 1 Factor analysis for institutional influences on drug testing adoption measure

Factor loadings

Drug testing Drug testingItems positive effects negative effects

Drug testingis an effective means of dealing with safety .868 –.125helps employees that use drugs .860 .018helps with productivity problems .903 –.063is an invasion of privacy –.253 .729may harm employees’ morale –.232 .771is too costly –.123 .668is opposed by employees .142 .829is opposed by the unions(s) .308 .634

Eigenvalues 2.68 2.56

Percentage variance 33.5 32.0

Cronbach’s alpha .87 .78

Note: significant results shown in bold.

APJHR_45_2_Haar.qxd 7/06/2007 7:57 PM Page 207

in step 3, and both interaction effects (predictor multiplied by moderator) wereentered in step 4. Following Aiken and West’s (1991) recommendation, thecentring procedure was used where interaction variables are z-scored.Following Cohen and Cohen’s (1983) recommendations, regression coefficientsfor the control effects were obtained from step 1 in each analysis, predictoreffects were obtained from step 2, moderator effects were obtained from step3, and interaction effects were obtained from step 4. A total of three regres-sion models resulted.

Descriptive statistics for all the study variables are set out in table 2. Table 2shows that the likelihood of drug testing adoption is significantly correlatedwith compliance with institutional pressures (r = .27, p < .01), drug testingnegative effects (r = –.27, p < .01), and organisational size (r = .29, p < .01). Whiledrug testing positive effects is not significantly correlated with drug testingadoption (r = .13, non significant), it is significantly correlated with compliancewith institutional pressures (r = .20, p < .05). Employee turnover rate is signifi-cantly correlated with drug testing positive effects (r = –.17, p < .05) and organ-isational size (r = .24, p < .01), while likely drug testing sector is significantlycorrelated with drug testing negative effects (r = .18, p < .05). The mean scorefor likely drug testing sector also indicates that almost a third of respondents(32.1% for n = 52) are in an industry that are more likely to adopt drug testing.

Results of the regressions for compliance with institutional pressures(hypotheses 1 and 4) are set out in table 3. Table 3 shows that compliance withinstitutional pressures was significantly associated with the likelihood of drugtesting adoption (ß = .27, p < .001), which supports hypothesis 1. From step 2,compliance with institutional pressures accounted for 7 per cent of the variance

208 Asia Pacific Journal of Human Resources 2007 45(2)

Table 2 Correlations and descriptive statistics of the study variables

Variables M SD 1 2 3 4 5 6 7

1. Employee turnover rate 9.1 7.4 –

2. Likely drug testing sector .32 .47 –.02 –

3. Compliance with institutional pressures 2.6 .88 –.07 –.10 –

4. Drug testing positive effects 3.0 1.1 –.17* –.11 .20* –

5. Drug testing negative effects 3.1 .81 –.00 .18* –.04 –.13 –

6. Organisational size‡ 4.0 1.3 .24** –.11 .09 –.08 .07 –

7. Likelihood of drug testing adoption 1.6 .79 .05 .12 .27** .13 –.27** .29** –

N = 162. *p < .05, **p < .01‡ Size was computed to a natural logarithm in the regression analysis to induce normality.

Results

APJHR_45_2_Haar.qxd 29/05/2007 10:25 PM Page 208

of the likelihood of drug testing adoption (p < .01). Further, organisational sizehad a significant interaction effect on the relationship between compliancewith institutional pressures and the likelihood of drug testing adoption (ß =.23, p < .01). These findings support hypothesis 4. From step 4, we can see thesignificant interaction effect accounted for an additional 4 per cent of thevariance towards the likelihood of drug testing adoption (p < .05).

To facilitate interpretation of the interaction effects for organisational sizetowards compliance with institutional pressures and the likelihood of drugtesting adoption, plots of the interactions are presented in figure 1. On figure1, compliance with institutional pressures low and high represent points aboveand below the mean (2.6), and similarly, the graphed lines for organisationalsize represent points above and below the mean (M = 4.0).

Plotting the interaction terms (figure 1) illustrates that even when firmsare small in size, those that are more highly compliant to institutional pressuresare more likely to consider adopting drug testing than firms with little compli-ance. This effect is exacerbated when firm size increases, with larger firmsreporting greater likelihood of drug testing adoption if they are highly com-pliant to institutional pressures.

There is also support for hypotheses 2 and 5, with table 4 showing thatdrug testing positive effects was significantly associated with the likelihood ofdrug testing adoption, albeit weakly (ß = .13, p < .1), which provides somesupport for hypothesis 2. This direct effect strengthens as the moderator andinteraction effects are added (to p < .05). Further, organisational size had asignificant interaction effect on the relationship between drug testing positive

Adoption of drug testing in NZ 209

Table 3 Hierarchical logistic regression for compliance with institutional pressures towards drug testing adoption

Likelihood of drug testing adoption

Variables Step 1 Step 2 Step 3 Step 4

Step 1: ControlsEmployee turnover rate .06 .08 .01 .00Likely drug testing sector .14 .14 .16 .16

Step 2: PredictorCompliance with institutional pressures .27** .25*** .32***

Step 3: ModeratorOrganisational size .27** .28**

Step 4: InteractionsCompliance with institutional pressures x organisational size .23**

R2 change .02 .07** .07** .04*Total R2 .02 .10 .16 .21Adjusted R2 .01 .07 .13 .17F statistic 1.43 4.08** 5.47*** 5.81***

† p < .1, *p < .05, **p < .01, ***p < .001, all significance tests were single-tailed.

APJHR_45_2_Haar.qxd 29/05/2007 10:25 PM Page 209

effects and the likelihood of drug testing adoption (ß = .23, p < .01). Thesefindings support hypothesis 5. From step 4, we can see the significant interac-tion effect accounted for an additional 5 per cent of the variance towards thelikelihood of drug testing adoption (p < .05).

210 Asia Pacific Journal of Human Resources 2007 45(2)

Table 4 Hierarchical logistic regression for drug testing positive effects towards drug testing adoption

Likelihood of drug testing adoption

Variables Step 1 Step 2 Step 3 Step 4

Step 1: ControlsEmployee turnover rate .04 .07 –.00 .02Likely drug testing sector .14 .15 .18* .18*

Step 2: PredictorDrug testing positive effects .13† .18* .17*

Step 3: ModeratorOrganisational size .32*** .32***

Step 4: InteractionsDrug testing positive effects x organisational size .23**

R2 change .02 .02 .09*** .05*Total R2 .02 .04 .13 .18Adjusted R2 .01 .02 .10 .15F statistic 1.40 1.69 4.90** 5.77***

† p < .1, *p < .05, **p < .01, ***p < .001, all significance tests were single–tailed.

Figure 1 Interaction between compliance with institutional pressures and likelihood of drug testing adoption by organisational size

Compliance with

institutional pressures

low (small firms)

Compliance with

institutional pressures

low (large firms)

Compliance with

institutional pressures

high (small firms)

Compliance with

institutional pressures

high (large firms)

1.1

1.3

1.5

1.7

1.9

2.1

Small firms Large firms

Lik

eli

ho

od

of

dru

g t

esti

ng

ad

op

tio

n

APJHR_45_2_Haar.qxd 29/05/2007 10:25 PM Page 210

To enable understanding of the interaction effects for organisational sizetowards drug testing positive effects and the likelihood of drug testingadoption, plots of the interactions are presented in figure 2. On figure 2, drugtesting positive effects low and high represent points above and below themean (3.0), and this is the same for the graphed lines for organisational size(M = 4.0).

Figure 2 shows that when firms are small in size there are low levels ofconsideration towards drug testing adoption, irrespective of their perceptionsregarding the positive effects of drug testing. However, this effect changes andthe likelihood increases when we consider the positive effects of drug testingtowards larger firms. In this regard, larger firms which view drug testing in apositive way are much more likely to consider drug testing adoption thanlarger firms which don’t consider drug testing as positive.

Results of the regressions for drug testing negative effects (table 5) showmixed support for hypotheses 3 and 6, indicating that drug testing negativeeffects was significantly and negatively associated with the likelihood of drugtesting adoption (ß = .33, p < .001), which supports hypothesis 3. However,organisational size did not have a significant interaction effect on the rela-tionship between drug testing negative effects and the likelihood of drugtesting adoption (ß = –.02, non significant). This fails to support hypothesis 6.

Overall, all three regression models were significant: Compliance withinstitutional pressures (F = 5.81, p < .001, total R2 = .21), Drug testing positiveeffects (F = 5.77, p < .001, total R2 = .18), and Drug testing negative effects (F= 6.43, p < .001, total R2 = .23). Finally, while the extent of employee drug

Adoption of drug testing in NZ 211

Figure 2 Interaction between drug testing positive effects and likelihood of drug testing adoption by organisational size

Drug testing positive

effects low

(small firms)

Drug testing positive

effects low

(large firms)

Drug testing positive

effects high

(small firms)

Drug testing positive

effects high

(large firms)

1.4

1.6

1.8

2

Small firms Large firms

Lik

eli

ho

od

of

dru

g t

es

tin

g a

do

pti

on

APJHR_45_2_Haar.qxd 29/05/2007 10:25 PM Page 211

testing policy adoption in New Zealand was not hypothesised, the surveyfound a current drug testing adoption rate of 8.0 per cent. Further analysis(cross-tab analysis) of those firms currently using drug testing (8% total) found2.5 per cent were for pre-employment, 4.9 per cent were for cause testing, and.6 per cent were random drug testing, and universally, no firm under 35employees was drug testing at all, reinforcing the role of organisational size.Comparisons with the Gilson and Wagar (1996) study are difficult given thatthe methodology of their study differs from that of the present study (they usedfirms with a minimum of 50 employees).

While the present study found that employee drug testing programs are stilluncommon in New Zealand, the likelihood of such programs being adopteddoes appear to be influenced by institutional factors. As expected, firms thatwere more compliant to pressures about adopting drug testing were more likelyto consider adopting drug testing programs. The findings confirm that pressureto adopt drug testing policies can be shaped from pressures outside an organ-isation, even for a policy such as drug testing which is currently uncommon inNew Zealand. Therefore, it could be suggested that institutional pressures tocomply and adopt human resource policies can occur no matter how currentlyuncommon the policy might be, like drug testing in New Zealand.

An interesting aspect of this study was exploring normative and coerciveisomorphic influences on drug testing adoption, which investigated pressures

212 Asia Pacific Journal of Human Resources 2007 45(2)

Table 5 Hierarchical logistic regression for drug testing negative effects towards drug testing adoption

Likelihood of drug testing adoption

Variables Step 1 Step 2 Step 3 Step 4

Step 1: ControlsEmployee turnover rate .02 .01 –.07 –.07Likely drug testing sector .15 .20* .22* .22*

Step 2: PredictorDrug testing negative effects –.33*** –.35*** –.35***

Step 3: ModeratorOrganisational size .32*** .32***

Step 4: InteractionsDrug testing negative effects x organisational size –.02

R2 change .02 .10*** .10*** .00Total R2 .02 .13 .22 .23Adjusted R2 .01 .10 .20 .19F statistic 1.35 5.44** 8.10*** 6.43***

† p < .1, *p < .05, **p < .01, ***p < .001, all significance tests were single-tailed.

Discussion

APJHR_45_2_Haar.qxd 29/05/2007 10:25 PM Page 212

from professional bodies and the media. The positive effects of drug testing,which focus upon productivity gains and safety concerns, were found to barelyinfluence adoption, the negative effects were far more strongly supported.Thus, the detrimental effects of drug testing program adoption, includingfinancial cost, morale issues and employee and union resistance, were foundto be a significant barrier to program adoption. New Zealand has a muchlower union density than a few decades ago, and adverse media attentiondescribing the potential complications towards drug testing may influenceemployer acceptance of drug testing policies. Consequently, policies that areseen as being negative and potentially adverse may be more easily resisted byorganisations than policies that are promoted as having positive benefits.Additional research is required to confirm these effects.

It was expected that larger organisations would have greater resources(e.g. financial, HR department, etc.) to reply to the institutional pressures toadopt and this was partially supported. Organisational size appears to be a keydeterminant of firms already doing employee drug testing, with no firm below35 employees doing drug testing. Regarding predicting future firm adoptionof drug testing, firm size was found to moderate the relationship between like-lihood of drug testing adoption and compliance with institutional pressures.As expected, larger firms were more likely to consider adopting drug testingif they respond with greater compliance to institutional pressures. These effectsare similar for firms registering greater perceptions of the positive effects fromdrug testing policies. Perhaps the institutional pressures become easier torespond to when action offers potential gains. However, organisational sizehad no effect on the influence of the negative effects of drug testing policies.The negative effects of drug testing were very strong, accounting for 10 percent of the variance for the likelihood of drug testing adoption, which indicatesthat firms of all sizes that perceived drug testing had negative effects wereunlikely to adopt drug testing.

When discussing these findings, it is important to note the context of thisstudy. New Zealand has had a low rate of drug testing adoption with around8 per cent of firms having such a policy. The finding that drug testing positiveeffects failed to predict the likelihood of adoption is not surprising as NewZealand, like Sweden (Brannstrom and Hopstadius 1994), probably perceivesitself as having a much less significant drug problem than the US. The benefitsassociated with drug testing adoption, whether productivity, employee health,and safety, may be seen as too limited for the majority of New Zealand organ-isations.

However, institutional pressures were found to both encourage andrestrain adoption. From the direct effects, it appears that those pressures thatencourage resistance and non-adoption (coercive isomorphism) were morepowerful an institutional pressure than mimetic pressures, because theemployer might have been reluctant to adopt drug testing anyway. Forexample, a New Zealand employer who suffers few if any drug-related

Adoption of drug testing in NZ 213

APJHR_45_2_Haar.qxd 29/05/2007 10:25 PM Page 213

problems would see little advantage in a drug testing program, but might moreeasily recognise the potential for employee resistance, union problems, as wellas cost and privacy issues. This interpretation is reinforced by the current 8 percent adoption rate found in this study. The strong negative relationshipbetween drug testing negative effects and policy adoption, and the weak rela-tionship between positive effects and policy adoption, may be influenced by acountry’s perception of drug use problems. Determining employer perceptionsof the extent of drug abuse in the New Zealand workforce, and whetherorganisations have experienced any drug-related issues would be usefulavenues to pursue.

We also acknowledge that we asked CEOs and HR managers to providea judgment of their likelihood to adopt a drug testing program, which differsfrom whether they might actually choose to adopt it. Clearly, there are differ-ences between choice and judgment (Billings and Scherer 1988). However, asSlaughter et al. (2004) have noted, it is not always possible to bridge the gapbetween the likelihood of something and definite decision-making. However,given our respondents were all CEOs and HR managers, it would be likelythat they would have an understanding about these issues and whether such apolicy would likely be adopted. Hence, we have greater confidence in ouranalyses given data collected is based on these major organisational players.

Future studies might seek to explore whether greater media attentiontowards employee drug abuse issues is related to a growth in drug testingadoption. Thus, if a change occurs in New Zealand and drug abuse issuesmight become more prominent, then we might expect the pressures to adoptdrug testing to become more prevalent. This potential situation suggests alongitudinal approach to drug testing adoption in countries that currentlyexperience low levels of adoption, like New Zealand. Within New Zealand,other research might explore additional factors that encourage and discourageadoption. A case study of a drug testing in a New Zealand firm may provideinsight into an employer’s rationale towards adopting drug testing programs.It may be that there are specific cultural differences in New Zealand thatinfluence drug testing adoption, or that safety concerns are simply outweighedby potential negative threats. In New Zealand the ability to sue an individualor employer for injury caused by accidents (including drug related) is verylimited. Finally, future studies might also explore other institutional factorssuch as race, to determine whether employers of ethnic minorities are morecompelled to adopt drug testing programs. Additional future research in NewZealand might include focusing upon drug testing adoption rates of largersized organisations, as these have been found in the present study to be morelikely to adopt such programs. Although our sample size of New Zealandorganisations encourage some caution when interpreting results, the inter-actional effect variable of organisational size was log-transformation to inducenormality, and the moderation effects were significant for two of the threepredictor variables.

214 Asia Pacific Journal of Human Resources 2007 45(2)

APJHR_45_2_Haar.qxd 29/05/2007 10:25 PM Page 214

In conclusion, the present study sought to investigate the institutionalpressures CEOs and HR managers face in deciding whether to adopt drugtesting programs. The findings suggest institutional pressures do significantlyinfluence the likely adoption of drug testing in New Zealand, and that largerorganisations are more responsive than smaller organisations to thesepressures. The findings provide evidence that institutional pressures can bothencourage and discourage organisations to adopt HR policies in New Zealand.We suggest that growth in drug testing adoption may require a significantchange in New Zealand society’s perceptions towards drug abuse among theNew Zealand workforce.

Jarrod M. Haar (PhD, Waikato) is a senior lecturer at the Waikato Management School, University of

Waikato, New Zealand. His research interests include the work-family aspects of conflict, backlash, and

fairness, and the impact of work-family benefits upon employee attitudes and behaviours. In addition, he

is interested in the strategic decision making of New Zealand firms, particularly towards drug testing and

management policies. He has published in various international journals.

Chester S. Spell (PhD, Georgia Inst of Tech) is an associate professor of management at Rutgers

University. His current research centres on employee health and wellness and how organizations

respond to these issues, including the adoption of employee substance abuse programs, the benefits

organizations provide to employees to help balance work and family demands, and employee percep-

tions of the fairness of their benefits packages. He has published in various international journals.

References

Aiken, L.G. and West, S.G. 1991. Multiple regression: Testing and interpreting interactions,Newbury Park CA: Sage.

Bahls, J. 1998. Drugs in the workplace. HR Magazine, February. http://www.shrm.org/hrmagazine/articles/0298cov.asp#jeb (accessed 10 March 2007).

Batchelor, K. 2004. Air NZ case opens door for more drug testing. Daily News, 3 May, edition1: 6.

BHP-Billiton. 2005. Health, safety, environment and community management standards:Contributing to sustainable development. 3 September: 1–28. http://www.bhpbilliton.com/bbContentRepository/docs/SustainableDevelopment/policiesAndKeyDocuments/HSECManagementStandardsIssue3.pdf (accessed 10 March 2007).

Billings, R.S., and L.L. Scherer, 1988. The effects of response mode and importance ondecision-making strategies: Judgment versus choice. Organizational Behavior and HumanDecision Processes 41: 1–19.

Blum, T.C., D.L. Fields, S.H. Milne, and C.S. Spell. 1992. Workplace drug testing programs:A review of research and a survey of worksites. Journal of Employee Assistance Research1(2): 315–49.

Botting, C. 1998. Drink may put workplace drug tests in question. Daily News 7 August,edition 1: 3.

Brannstrom, G., and B. Hopstadius. 1994. A comparative study between the ILO’s guidingprinciples and drug testing at workplaces in Stockholm, Sweden. Employee CounsellingToday 6(5): 4–6.

Adoption of drug testing in NZ 215

APJHR_45_2_Haar.qxd 29/05/2007 10:25 PM Page 215

Cohen, J., and P. Cohen. 1983. Applied multiple regression/correlation analysis for the behavioralsciences, 2nd edn. Hillsdale, NJ: Erlbaum.

Dannin, E. J. 1996. The price of everything – the value of nothing. Electronic Journal ofRadical Organisation Theory 2(1). http://www.mngt.waikato.ac.nz/ejrot/Vol2_1/dannin.pdf (accessed 10 March 2007).

Dearnaley, M. 2003a. Number of unions double. New Zealand Herald, 10 July.Dearnaley, M. 2003b. Unions seek injunction against airline drug and alcohol testing. New

Zealand Herald, 16 July.Deephouse, D. L. 1996. Does isomorphism legitimate? Academy of Management Journal 39(4):

1024–39.DiMaggio, P., and W. Powell. 1983. The iron cage revisted: Institutional isomorphism and

collective rationality in organisational fields. American Sociology Review 48: 147–60.Dominion, The. 1998. Judge rules forced medicals illegal and drug testing harsh. 14 October,

edition 2: 8.Eckersley, K. 1995. Dealing with drugs, part II: Lightening the employer’s latest burden,

Employee Counselling Today 7(4): 20–2.Frone, M.R. 1998. Predictors of work injuries among employed adolescents. Journal of Applied

Psychology 83(4): 565–76.Galaif, E.R., M.D. Newcomb, and J.V. Carmona. 2001. Prospective relationships between

drug problems and work adjustment in a community sample of adults. Journal ofApplied Psychology 86(2): 337–50.

Gilson, C. and T.H. Wagar. 1996. Employee involvement and human resource managementin Australian, New Zealand and Canadian organisations. (A copy of this unpublishedreport is available from Jarrod Haar (haar@waikato.ac.nz).)

Gupta, P.P., M.K. Dirsith, and T.J. Fogarty. 1994. Co-ordination and control in a governmentagency: Contingency and institutional theory perspectives on GAO. AdministrativeScience Quarterly 39(2): 264–84.

Harris, M., and L.Heft. 1992. Alcohol and drug use in the workplace: Issues, controversies,and directions for future research. Journal of Management 18(2): 239–66.

Hayghe, H.V. 1991. Anti-drug programs in the workplace: Are they here to stay? MonthlyLabour Review, April: 26–9.

Hoffman, J.P. and C.L. Larison. 1999. Worker drug use and workplace drug testingprograms: Results from the 1994 National Household Survey on Drug Abuse.Contemporary Drug Problems 26(2): 331–54.

Institute of Transportation Engineers. 2005. Australia: Roadside drug testing. Institute ofTransportation Engineers Journal 75(2): 18.

Kelsey, J. 1997. The New Zealand experiment: A world model for structural adjustment?, 2ndedn. Auckland, NZ: Auckland University Press.

Kossek, E.E., P. Dass, and B. DeMarr. 1994. The dominant logic of employer-sponsored workand family initiatives: Human resource managers’ institutional role. Human Relations47(9): 1121–49.

Knudsen, H.K., P.M. Roman, and J.A. Johnson. 2004. The management of workplacedeviance: organisational responses to employee drug use. Journal of Drug Issues 34(1):121–44.

Lu, Y. and B.H. Kleiner. 2004. Drug testing in the workplace. Management Research News27(4/5): 46–53.

Oleson, C. 2004. Negotiating and teaching drug testing: A labor perspective. Labor StudiesJournal 28(4): 67–86.

Oliver, C. 1991. Strategic responses to institutional processes. Academy of Management Review16(1): 145–79.

Oliver, C. 1997. Sustainable competitive advantage: Combining institutional and resource-based views. Strategic Management Journal 18(9): 697–713.

216 Asia Pacific Journal of Human Resources 2007 45(2)

APJHR_45_2_Haar.qxd 29/05/2007 10:25 PM Page 216

Paronto, M.E., D.M. Truxillo, T.N. Bauer, and M.C. Leo. 2002. Drug testing, drug treatment,and marijuana use: A fairness perspective. Journal of Applied Psychology 87(6): 1159–66.

Perkin, H. 1996. The third revolution: Professional elites in the modern world. London:Routledge.

Press, The. 1998. Themes popular. 9 February, edition 2: 28.Rockmore, B.W., T.W. Zimmerer, and F.F. Jones. 1997. Building a socially responsive drug

testing program. Journal of Workplace Learning 9(7): 220–4.Rothman, M. 1988. Random drug testing in the workplace: Implications for human resource

management. Business Horizons 31(2): 23–27.Scott, W.R. 1995. Institutions and organizations. Thousand Oaks, CA: Sage.Segal, J. 1991. Testing in the union context. HR Magazine 36(12): 81–4.Seijts, G.H., D.P. Skarlicki, and S.W. Gilliland. 2003. Canadian and American reactions to

drug and alcohol testing programs in the workplace. Employee Responsibilities and RightsJournal 15(4): 191–208.

Slaughter, J.E., M.J. Zickar, S.Highhouse, and D.C. Mohr. 2004. Personality trait inferencesabout organizations: Development of a measure and assessment of construct validity.Journal of Applied Psychology 89: 85–103.

Statistics New Zealand. 2005. New Zealand business demographic statistics (at February 2005).http://www2.stats.govt.nz/domino/external/pasfull/pasfull.nsf/web/Hot+Off+The+Press+New+Zealand+Business+Demographic+Statistics+At+February+2005?open(accessed 7 January 2006).

Stone, E. and J. Hollenbeck. 1989. Clarifying some controversial issues surrounding statisticalprocedures for detecting moderator variables. Journal of Applied Psychology 74(1): 3–10.

Tepper, B.J. 1994. Investigation of general and program-specific attitudes toward corporatedrug-testing policies. Journal of Applied Psychology 79(3): 392–401.

Truxillo, M., L. Normandy and N. Bauer. 2001. Drug use history, drug test consequences,and the perceived fairness of organizational drug testing programs. Journal of Businessand Psychology 16, 87–99.

Turner, M. 1995. To test recruits or test at random? Personnel Management 1(24): 22–7.Zetlin, M. 1991. Combating drugs in the workplace. Management Review 80(8): 17–19.

Adoption of drug testing in NZ 217

APJHR_45_2_Haar.qxd 29/05/2007 10:25 PM Page 217